REPORT: Facebook Ads Surge Despite Lag In ROI

Despite lagging return on investment, advertisers continue to pour an increasing amount of their advertising expenditures into Facebook.
According to the new report out from OTR Global which surveyed 15 U.S. sources (six online agency media buyers, fivesearch agency directors, and four social media analytics directors), advertising on Facebook has grown at a pace of 64 to 69 percent over the past 12 months with a similar increase expected over the next year.

While growth remains, it seems as though advertisers are cautiously optimistic. The report also explored the area of shopping on Facebook, which is just beginning to grow. There were a number of findings in the report, which we’ve summarized below.

ROI Still Lags Search

When it comes to the bottom line, the ROI for Facebook advertising appears mixed. While there are some individuals who are claiming that the company’s self serve platform continues to drive an extremely high ROI, others are suggesting that they have yet to see it.

Despite that, brands are turning to the site to help build more awareness. Like an unnamed interactive director says in the report:

Brands are making a big push [on Facebook]. At an effective [cost per impression] that’s well under half as expensive of most TV or glossy magazine buys, brands are seeing that they can easily equal the reach at much more attractive frequency, so it’s becomign the awareness and interest builder of choice.

Such positive remarks are not uncommon, but one of the most significant drivers of positive sentiment appears to be cost.

Advertising On Facebook Is Still Cheap

In contrast to more expensive advertising destinations like AOL and Yahoo! where CPMs can be $15 – $25 or even higher, Facebook is reportedly hovering at somewhere between $4 and $8.

Self-serve is also still cheap, although increasing. The caveat to the cheap advertising was that performance was going to be relatively difficult to maintain for smaller advertisers, something that we’ve covered extensively as automated split testing platforms and other systems have grown. As the report states:

Sources also cautioned that in the absence of often expensive third-party expertise in planning and running campaigns, many advertisers – especially smaller companies – were in danger of quickly hitting a plateau in their performance curve without access to better tools and guidance from Facebook.

Facebook Users Not Shopping Yet

One of the more interesting segments of the report was the area on shopping. It was mentioned during a section of the report on ROI. As we’ve covered over the past few months, an increasing number of shopping services are emerging on Facebook.

As one person quoted in the report states, “Facebook has not crossed the threshold to being a true shopping destination.”

Since online shopping comprises a large percentage of search advertising, it helps illustrate an area in which Facebook has a large opportunity for growth.

While it’s not clear whether or not Facebook will ever turn into a shopping destination, it appears as though those who do shop on the social network stick around for a longer period of time.

As one individual states, “We are finding that the typical Facebook shopper will visit 12 pages during their session, while with Google search results, the shopper will visit four pages.”

For the time being, Facebook is not a shopping destination, however that could very well change in the coming years. If successful, shopping would clearly have a dramatic impact on the company’s ad revenue.

Facebook Is Killing Newspapers

The last finding from this report that stood out was that newspaper advertising dollars appears to be the greatest source of Facebook’s growth.

When the survey recipients were asked about increases in their Facebook advertising budgets, the two greatest sources were newspaper ad spend and incremental growth.

So while Facebook didn’t kill the newspaper on their own, it appears that their definitely contributing to its death.

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